LondonMetric (LMP), the acquisitive logistics real estate investment trust, has bought a 9.5% stake in Schroder Real Estate (SREI), raising speculation that its chief executive Andrew Jones may be lining up a new bid.
LMP has grown its market value to £4.5bn and nearly doubled its total portfolio to £7bn with a string of acquisitions in the past three years including LXI REIT, CT Property Trust and Urban Logistics most recently in April.
This morning it disclosed a position of nearly 46.5m shares in SREI, a £264m UK generalist REIT with a high 51% weighting to industrials whose shares stand on an 18% discount to net asset value (NAV).
The disclosure did not set the shares racing however. After an initial 1.5p gain to 55.5p the price drifted lower to close unchanged at 54p. LMP dipped 1.1% or 2.1p to 194.7p with its stake in SREI worth around £25m.
Despite their valuation gap, SREI shares have delivered a sector-leading 135% total shareholder return over five years, according to the Association of Investment Companies.
In recent years, Schroders fund managers Nick Montgomery and Bradley Biggins have sought properties that can generate a “green premium” by upgrading to higher sustainability standards and zero carbon targets.
Over 10 years, however, the return from the shares, which peaked at 142p in 2007 before the financial crisis, has been more muted at 55%.
According to its last fact sheet, as of 30 June six of its 10 biggest assets were industrial and trading parks that could be of interest to LMP. The largest was the £53m Stacey Bushes industrial estate in Milton Keynes. It also owns a 50% stake of the University of Law campus in central London worth £38.4m.
In early August the company’s first quarter update showed its new financial year had got off to a quiet start with a 1.6% total investment return in the three months to 30 June with NAV edging 0.2% higher to 61.7p per share. Quarterly earnings rose 7.3% to 0.9p per share to cover the 6.8%-yielder’s dividend.
Annual results in June were more exciting, however, with an 11% total return in the 12 months to 31 March, its strongest 12 months since 2022. It is due to report half-year results to 30 September on 27 November.
Meanwhile, earlier this month LMP signalled it could be ready to look for a new deal. In a half-year update it said it was close to fully integrating Urban Logistics’ systems on to its platform, had refinanced secured debt inherited from acquisitions with unsecured loans on similar interest rates and sold £185m of non-core assets.
It said a further £65m of acquisitions were under offer and the company remained “engaged” on “investment opportunities from sale and leasebacks, development fundings, portfolios and M&A”.
SREI’s other big shareholders include Rathbones Investment Management on nearly 10% and Ameriprise, the $45bn financial services group, which emerged with a 5% stake last month. Connor Broadley, the Mayfair-based wealth manager, also cut its position to 1.5% from 2.5% in September.
